Losing its lead in Internet traffic and ad revenue along with its chance to win the search market, Yahoo aims to reinvent itself. But with a slowing economy and downward forecasts for earnings, how bad are things for Yahoo? That could depend on Microsoft’s plans to buy the struggling Web portal.

Accentuate the Positive

One big challenge for Yahoo: convincing members, as well as current and potential employees, that it has something fresh and exciting to offer.

A prerequisite, according to vice president of product strategy Bradley Horowitz: addressing the legitimate criticisms of how Yahoo has done business, with its reliance on overly bureaucratic processes that have restricted innovation. "There is merit to those complaints, that this is a big company and it's been hard to get the attention of the people who make the decisions," he says. "Some of that we have to own up to."

Horowitz has instituted several programs to get a more positive Yahoo vibe going. On "Hack Day" events Yahoo holds periodically at headquarters and other locations around the globe, company programmers brainstorm, prototype and demo new products and features they suggest adding to Yahoo sites. One Hack Day idea that recently made it into use on the Yahoo Shopping site is a "search by color" feature that lets shoppers see all the products in a given category—shirts, shoes, appliances—that most closely match the desired color.

A more involved product proposal can win the developer a stint at Brickhouse, an internal product incubator where employees take a few weeks' break from their regular jobs to flesh out prototypes. An early Brickhouse product that's gotten a lot of attention from tech analysts and bloggers is Yahoo Pipes, a visual Web tool for assembling and manipulating Internet data feeds and Web services. Mashups published to the Pipes site include one that sucks in Reuters news stories, Horowitz has instituted several programs to get a more positive Yahoo vibe going. On "Hack Day" events Yahoo holds periodically at headquarters and other locations around the globe, company programmers brainstorm, prototype and demo new products and features they suggest adding to Yahoo sites. One Hack Day idea that recently made it into use on the Yahoo Shopping site is a "search by color" feature that lets shoppers see all the products in a given category—shirts, shoes, appliances—that most closely match the desired color.

A more involved product proposal can win the developer a stint at Brickhouse, an internal product incubator where employees take a few weeks' break from their regular jobs to flesh out prototypes. An early Brickhouse product that's gotten a lot of attention from tech analysts and bloggers is Yahoo Pipes, a visual Web tool for assembling and manipulating Internet data feeds and Web services. Mashups published to the Pipes site include one that sucks in Reuters news stories, matches its datelines to Yahoo's geographic database, and displays its headlines overlaid on a map via Yahoo Maps.

Rather than invest in too many mammoth projects, Yahoo wants to place lots of small bets on new products and then doubledown on those that show promise, Horowitz says. This approach isn't appropriate for big infrastructure overhauls such as Panama but it's ideal for more discrete projects.

Although it wasn't a Brickhouse product, Horowitz also cites Yahoo Mash because it wasn't "a giant undertaking by Yahoo teams with dozens of people, but the passion product of a small team." Currently operating as an invitation-only beta site, Mash is Yahoo's second attempt to build a friendto- friend social network to compete with Facebook and MySpace. The first, Yahoo 360, never really took off.

"Now our job is to be good listeners," Horowitz says. If Mash "resonates with the marketplace," Yahoo will charge ahead with it, he says, but the company will retrench "if people are suffering social network fatigue and we didn't hit the bull's-eye, or if this is the wrong service at the wrong time."

Open for Business

Yahoo is also trying to stir things up by opening parts of its technology platform, encouraging others to build on them, and holding Open Hack Day events, where outsiders can showcase their own Yahoo-based inventions.

You can embed Yahoo search results or maps in your own applications through Web services application programming interfaces (APIs) documented at the Yahoo Developer Network Web site, for instance, and that access is free unless you exceed a "rate limit" threshold or require a commercial license with service-level guarantees. Yahoo currently supports more than 30 such APIs, including those for Flickr and other sites it owns.

Bausch developed a keen appreciation for Yahoo's commitment to its Web APIs when Google curtailed support for the search API it had been offering based on SOAP (Simple Object Access Protocol) at the end of 2006. Although it didn't cut off access to existing users, Google stopped issuing application key codes that would let people build new applications on the service. The alternative Google promoted was more of a user interface widget than a Web service. That came as a shock to Bausch, who had built most of his Google Hacks examples around the SOAP API. "I guess they viewed it as sort of an experiment," he says.

Yahoo also wins points for building most of its Web services around REST (Representational State Transfer) as opposed to SOAP, Bausch says. Yahoo does have SOAP-based APIs for Yahoo Mail and its search marketing service. But by making those the exception to the rule, Yahoo appeals to Web developers who consider REST a simpler way of invoking remote services. The very features that make SOAP more sophisticated (and the favorite in enterprise environments) also make it complicated— every invocation of a remote service must be formatted in Extensible Markup Language (XML), with the actual message for the remote computer wrapped in an XML-based envelope, and the reply must be formatted similarly.

With REST, the invocation can be as simple as using the Web's GET command, much like a user retrieving www.somesite. com?query=myquery and getting back an answer in relatively simple XML.

Some Yahoo services also support alternative encoding schemes, such as the JavaScript Object Notation (JSON), which saves JavaScript programmers the trouble of parsing results returned in XML.

So while Google continues to generate excitement around the API to its mapping services, Yahoo provides the best Web services for many other functions, Bausch says. These include Yahoo's term extraction service, which identifies the most relevant keywords in any block of text, and its geocoding service, which returns map coordinates for addresses.

In addition to these back-end services, Yahoo shares what it has learned about front-end Web development in its Yahoo User Interface toolkit, a set of components developers can download and embed in their own Web applications. "For developers, it's kind of an easy way to get a peek under the hood because the YUI is what we use on the home page of Yahoo.com," says Chad Dickerson, head of the Yahoo Developer Network.

The YUI represents years of work on delivery of everything from consistently formatted Web pages to more elaborate techniques such as animation. Inconsistencies among browsers in implementation of JavaScript, Cascading Style Sheets, and even different versions of the same browser, have always been a challenge for Web developers, and the YUI is only one of many solutions. But the existence of the YUI means if you see a nifty user interface effect on a Yahoo Web site, you may be able to plug it into your own site easily. The interactive calendar widget on Southwest Airlines' site, for example, comes from the YUI.

Nik Kalyani, cofounder of open source software startup DotNetNuke, says he has worked with both the YUI and Yahoo's search APIs and has been generally impressed. He appreciates the depth of the documentation behind the YUI and that its license allows for unrestricted commercial use. In particular, he appreciates the base components designed to level the playing field between browsers for uniform formatting and script processing. As for Yahoo's Web services, he particularly appreciates the API for contextual analysis. "It is really useful to extract tags from blocks of text and the results are, it seems magically, accurate," Kalyani says.

"We have this Internet infrastructure we've spent a decade developing, and by opening it up we're making sure the world knows it's here and available for the world to build on," Horowitz says. The free services and software are particularly attractive for startups trying to conserve capital, and sooner or later Yahoo will wind up buying some of those companies partly because of the technological ties it has forged with them, he says.

Benefits are also accruing to product teams such as the one behind Yahoo Real Estate, which has been seeing positive results from a recent series of Web site upgrades. "We're at the beginning of a mashup product strategy where we're leveraging a lot of internal capabilities, as well as Web services that have become available in the real estate sector that help us work with all our newfound partners," general manager Michael Yang (no relation to CEO Jerry Yang).

Over the past year, the site has risen from 15th to second (behind Realtor. com) in ComScore's traffic rankings, with much of that improvement coming from new features that incorporate multiple internala nd external Web services. A popular addon in a home-valuation tool that presents estimates from three partner sites and pulls in relevant commentary from Yahoo Answers.

Yahoo has a regular "refresh" schedule for its Web sites, but the Real Estate site, created in 1998, had been essentially unchanged since 2004, according to Yang. Since overhauling that site last year, Yahoo has committed to release further improvements every three to six months.

Yahoo uses essentially the same Web services approach to internal application integration that it applies to its public APIs, but internal developers also have access to other, private APIs and to enhanced versions of the public APIs, according to Steve Schultz, director of products for the Real Estate group. Similarly, the YUI serves both internal and external audiences, giving developers a base set of user interface components, with welldocumented guidelines for effective use.

"Just having that core library of knowledge and then skinnying it down to best practices and templates really saves you on time to market," Yang says.—D.F.C.

David F. Carr is the Technology Editor for Baseline Magazine, a Ziff Davis publication focused on information technology and its management, with an emphasis on measurable, bottom-line results. He wrote two of Baseline's cover stories focused on the role of technology in disaster recovery, one focused on the response to the tsunami in Indonesia and another on the City of New Orleans after Hurricane Katrina.David has been the author or co-author of many Baseline Case Dissections on corporate technology successes and failures (such as the role of Kmart's inept supply chain implementation in its decline versus Wal-Mart or the successful use of technology to create new market opportunities for office furniture maker Herman Miller). He has also written about the FAA's halting attempts to modernize air traffic control, and in 2003 he traveled to Sierra Leone and Liberia to report on the role of technology in United Nations peacekeeping.David joined Baseline prior to the launch of the magazine in 2001 and helped define popular elements of the magazine such as Gotcha!, which offers cautionary tales about technology pitfalls and how to avoid them.